Did you have financial goals in your New Year’s resolution and are you on track? As you most likely agree we need to be honest with ourselves that change is only going to happen if we make it happen. And if improving your financial situation is one of those big goals for 2023, then let’s break down the changes you need to make 2023 a successful year.


You need a budget

The idea behind a budget or spending plan is to know how much you can spend to be in line with your overall financial targets. Your first step here is naturally to find out what your spending habits are right now. It’s easier than you think if you usually pay with your card just download all your transactions in online banking from the past 3 months and categorize them (housing, groceries, car, entertainment, etc.).

Add all of your costs up and divide them by the amount of months to see your average spending per month, per category. How do your monthly costs compare to your monthly income?

If you’re spending more money than your household makes every month, then you need to go back and look at your expenses you just figured out and cut. Cut any expenses that are not a necessity until you get your expenses lower than your income. We recommend to budget a small amount every month to be saved or invested.

Once your budget is ready you know what things you can currently afford without overspending.

You need an emergency fund

It is an absolute necessity to have an emergency fund ready for the day something unexpected happens. If you don’t have such an emergency fund yet, make sure you leave space in your budget to build one. It is generally recommended to have three months of running costs ready for the worst case. Things are going to happen – you can count on that. So protect yourself and your family and build up an emergency fund.


Stop relying on debt

Consumer debt is easy to get nowadays, but the price is mostly much higher than one likes to admit. Stop making in-the-moment decisions that leave you chained to owing other people money for years. Do think twice before purchasing something you don’t have money for. Make educated decisions and preferably spend your cash. Know your budget and stick to it.


Pay off your debt

Make paying off your credit card and consumer credit debts a priority and include this in your budget. Start with your smallest balance debt and kill that one first and then move on to the next smallest debt. Once you turn debt-free you will feel like getting a pay rise as you will have money left for yourself. Just imagine you would be saving all that money currently going towards your debt payments.


If money is tight…

If you don’t have the extra room in your budget between saving an emergency fund and paying off debt you need to get serious and put a plan in place. First, save up the emergency fund, at least corresponding to one month of running costs. After that start to pay off as much debt as you can for the next three months. You can keep going back and forth with this until you finally have your emergency fund in place and paid off your debt.

With any path you choose to change your finances in 2023: your budget will show you the way.

Michael Lutzeier